Fight brewing over DHHS plan to close Penobscot Nursing Home

PENOBSCOT, Maine — A state proposal to close a Penobscot nursing home is, for the second time in a matter of months, focusing attention on the financial challenges faced by senior living facilities in rural Maine and the important roles they often play in communities.

But while concerns about Penobscot Nursing Home are strongest on Blue Hill Peninsula, the fate of the home could affect current or proposed facilities in Calais, Bucksport and Ellsworth because of the complexity of Maine’s strictly regulated elder care business.

The Maine Department of Health and Human Services took over management of the Penobscot Nursing Home and Northern Bay Residential Living Center in October 2008 after allegations that the facility’s finances were being mismanaged.

Now, roughly 3½ years later, DHHS has filed a court petition to close the Penobscot home once a new facility proposed by a different company is built in nearby Bucksport within 18 to 24 months. DHHS also asked the court to foreclose on the facility’s state-issued MaineCare “bed rights” to sell them to First Atlantic Healthcare — the would-be developer of the Bucksport facility — for $500,000.

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“This is the best scenario out of some poor choices,” said Irving Faunce, administrator at the Penobscot home.

But the home’s owner, the property’s mortgage holder and officials throughout Blue Hill Peninsula plan to fight DHHS. Critics argued the closure could harm residents of the home who would not transition well to a new environment and would hurt the community that has hosted the facility for about 50 years.

Paul Bowen, chairman of the Penobscot Board of Selectmen, said that until the DHHS court filing, he and others in town were unaware about plans to close the Penobscot home and transfer the beds to Bucksport.

The Penobscot home is a “community-based facility” where residents have for decades lived, worked or visited family members, Bowen said. News of the possible closure — even though it is still two years away — has upset residents of the home and poses a challenge for the town.

“It is really our only payroll of any size and it is one of the largest taxpayers in town,” Bowen said. “We have had no opportunity to comment on the impact that this would have on our area.”

Penobscot is the second rural eastern Maine community this year to face the prospect of losing its local nursing home. And while the situations are not identical, they are similar and could even overlap in the regulatory environment.

Openings and closings of nursing home facilities are tightly regulated by DHHS because state and federal funds — through MaineCare — pay for about 72 percent of occupants at nursing homes, according to department figures.

First Atlantic has stated in filings with DHHS that the company would replace the capacity from Calais with new beds at the proposed Bucksport facility and at the replacement Colliers Nursing Facility in Ellsworth, which was approved by the department this year. DHHS already has given conditional approval to the Bucksport facility.

It was unclear Tuesday whether the outcome of the DHHS court petition regarding Penobscot Nursing Home would affect the proposed Bucksport facility. First Atlantic officials could not be reached for comment Monday or Tuesday and DHHS officials referred questions on that matter to the company.

Located between Deer Isle and Bucksport, the Penobscot home offers assisted-living facilities as well as traditional nursing home care, hospice care and the type of skilled care often associated with rehabilitation after a hospital stay. Roughly half of the home’s 85 occupants reside in the assisted-living areas.

But in 2008, the Penobscot home and six other Maine facilities operated by Eagle Landing Residential Care LLC were placed in state receivership after DHHS officials became concerned that financial problems could affect residents’ well-being. Vendors reportedly had stopped delivering food, fuel and supplies for nonpayment at some facilities.

Since that time, management of the Penobscot facility has been overseen by a court-appointed emergency receiver, Sandy River Group. But DHHS has claimed in court filings that the facility was nearly $330,000 in the red last year and that despite the emergency receiver’s efforts it cannot meet its financial obligations.

“Without the continued protection afforded by the receivership statute, the Penobscot facility could not continue to be run safely and securely for the residents,” DHHS officials wrote in their April 6 petition filed in Kennebec County Superior Court.

The petition later states that Eagle Landing “has no viable plan for the continued operation” of the facility outside of receivership. Additionally, the physical facility is described as outdated, inefficient and in need of a costly wastewater treatment facility upgrade.

The CEO of Eagle Landing, Sifwat Ali, forcefully disagreed with those assessments, arguing he has presented three separate proposals to DHHS. Ali said there is no question in his mind the Penobscot home is a financially viable facility and he accused the receiver of “purposefully deteriorating” conditions in the home.

“What we are going to do is we will fight it out,” Ali said. “They will have to justify to the court of law that this [closure] is necessary.”

Further complicating matters, Eagle Landing is not the only company planning to fight for its financial stake in the Penobscot home. When Eagle Landing acquired the business in 2006, the previous operator, Betlins Corp., held onto the mortgage for the buildings.

Wendell Dennison, president of Betlins, said neither Eagle Landing nor the emergency receiver has paid the mortgage on the property since June 2010. All told, Dennison estimated he is owed roughly $1.7 million and he has commenced his own foreclosure proceedings on the property. His attorney also is contesting the DHHS’ petition.

“A lot of people don’t want to see it closed,” Dennison said in an interview. “That facility, other than the waste treatment [system], is in pretty good shape compared to most.”

Faunce, administrator of the Penobscot home, agreed that the facility is clean and well-maintained but argued it is showing its age, not to mention the noncompliant wastewater treatment system. But Faunce reiterated that transferring the bed rights to a future facility in Bucksport — less than 15 miles up the road — is the best option for both residents and employees.

“In a bad situation we are probably in the best position we can be in,” Faunce said. “I think the state deserves some credit for saving this facility for four years.”

Bowen and elected officials from towns throughout the Penobscot area have asked the court for additional time to comment on DHHS’ proposal even as they seek alternatives to closure.

Meanwhile, Richard Erb with Maine Health Care Association said the situations in Calais and Penobscot help underscore the important role such facilities serve in their communities both in terms of caring for elderly residents and providing jobs.

Erb, whose organization represents more than 300 nursing homes and other care providers around the state, said many rural, older nursing homes are struggling to survive financially because of low reimbursement rates.

While some facilities that go into receivership eventually are reopened, others are closed because the state does not want to be in the nursing home business, Erb said.

“When a nursing home goes into receivership, that obviously is not supposed to be a permanent situation,” Erb said.